It's called "Overselling". Overselling is the practice of selling more disc space and/or bandwidth then you actually have. So what they do is this.

If the host has 1,000GB of bandwidth, and 80gb disc space, they sell it as if they have 2,000GB bandwidth and 160GB disc space. This is because when a user buys a hosting package, they generally only use about %20 of what they purchased. They might buy a 1gb /20gb package, and only use 250mb/5gb . This leaves room for the host to oversell.

The bad part about this is that when / if any of the users actually use what they have purchased, the server then becomes extremely unstable, and can cause downtime, or decreased server performance. The only upside goes into the hosts pocket. If you see a host offering a crazy amount of bandwidth for pennies, it is best to find another host, as you can almost guarantee that the server will soon be overloaded, and you'll be left with very little uptime, or very slow speeds.

There is also a difference in bandwidth. Teir 1 bandwidth, or level 1 bandwidth is the best obviously, and then there is cognent bandwidth. It's like the difference between bootleg clothes and genuine. While the bootleg clothes might look great, they will never last as long, or fit as well as the genuine clothes.